Reduce Manufacturer Overhead Lower Implant Prices Reduce Waste Streamline Processes


“A lot of the (healthcare providers) today are beginning to recognize that the rep is not a ‘free’ service, [...] it’s actually part of a bundle that results in prices that they may or may not want to evaluate.”
— Donald Casey, CEO of Cardinal Health's medical segment.

43% of implant costs goes to supporting sales.

Our service program provides your facility and GPO an opportunity to save because manufacturers save 30-80% on representation when outsourcing with SimplOR.

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 “Selling and General Administrative (SG&A) costs the manufacturer 43% of the total cost of the implant. This component represents the markup by the manufacturer for selling and distributing this implant, a cost that is passed on to both the hospital and patient customers (Maguire, 2013). […] Historically, hospitals have had a difficult time discovering the true manufacturing costs of implants they are purchasing. Consequently, this means the hospitals are missing a key piece of information for negotiating pricing discounts with manufacturers (Botimer, White Paper, 2013) […]

With a cost component of 43% for S, G & A, what if hospitals were able to negotiate with an innovative approach by assisting manufacturers in the reduction of this very expensive asset?

What if the hospitals and surgeons were guaranteed that a specialist would be equally or better trained than the representatives who attend these cases?

“Traditional negotiating tactics will yield low to mid-single-digit savings,” “To get significantly north of 10%, I really think you need to change the model.”
— Gene Kirtser, CEO of Resource Optimization & Innovation - A group purchasing organization formed by Mercy, in Chesterfield, Mo.

A 43% reduction in price would give the hospital a significant price reduction opportunity, and the manufacturer (without the cost of S, G & A) would still have a great profit margin opportunity (Mitchell, Case Study, 2013). While a 43% potential price reduction sounds exciting, depending upon the segment (joints or spine) and the manufacturer, that 43% could be even higher.”

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The above table lists five spine companies that have “advertised their annual sales, their gross profit, and select expenses including their S, G, & A for 2012 in a well respected orthopedic publication (Young, Robin, September 2013). When four of the five companies’ S, G, & A components were averaged together, the figure equaled 55%. With potential cost savings to hospitals above the 50% mark, and still, the opportunity for manufacturers to make a significant profit, and both surgeons and hospitals are guaranteed high-quality training and support for their procedures.”

The service model approach

If hospitals remove the need for device makers to pay expensive sales reps and free them from marketing and inventory risk, “the device company can profitably provide the product for a fraction of what they currently do,” said Dr. John Steinmann, a neurosurgeon who is also CEO of Renovis Surgical Technologies, a device firm that offers a rep-less model.

Many hospitals have become complacent in accepting the traditional sales and service arrangements, and many surgeons rely on the sales rep to provide guidance during procedures. In addition, hospital supply chains sometimes are inefficient in handling the delivery, storage, and selection of devices used in surgeries.

On the other hand, reducing the role of sales reps in the OR could help hospitals with safety and liability issues. Removing reps may improve infection control and reduce legal risks from a lack of informed consent if patients aren't told a sales rep was in the OR during their procedure, said Consumers Union's McGiffert. Last year, the ECRI Institute published a report calling for hospitals to develop policies around the presence of sales reps in the operating room.